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Monday, September 10, 2012

Speaking of Brass

This morning's Washington Post has an "adaptation" from Bob Woodward's new book, The Price of Politics. It concerns the debt ceiling crisis of July and August 2011, when the Republicans threatened to blow apart the world economy if they didn't get their way.

“[A veto of the Republican plan] would have massive effects,” Geithner said. Treasury had to
conduct a bond auction in the open market in about five days, the
regular Tuesday auction, with settlement on Thursday. That first auction
could be a kind of tripwire, setting off a chain reaction. The federal
government couldn’t pay its bills. “Why would anyone buy U.S. bonds if
it’s an open question whether we are going to have the authority to pay
for them?”

Another possible outcome, Geithner said, was perhaps worse. “Suppose we have an auction and no one shows up?”

The
cascading impact would be unknowable. The world could decide to dump
U.S. Treasuries. Prices would plummet, interest rates would skyrocket.
The one pillar of stability, the United States, the rock in the global
economy, could collapse.

“So,” the president said, “if we give
$1.2 trillion now in spending cuts” — the amount in the House bill to
get the first increase in the debt ceiling for about six to nine months —
“what happens next time?” The Republicans would then come back next
year, in the middle of the presidential campaign, and impose more
conditions on the next debt ceiling increase. He could not give the
Republicans that kind of leverage, that kind of weapon. It was hostage
taking. It was blackmail. “This will forever change the relationship
between the presidency and the Congress.

“Imagine if, when Nancy
Pelosi had become speaker, she had said to George W. Bush, ‘End the Iraq
war, or I’m going to cause a global financial crisis.’ ”

So, Obama said, they had to break the Republicans on this. Otherwise, they would be back whenever it suited them politically.

They
were out of options, Geithner said. The only one might be accepting the
House bill, loathsome as it might be. “The 2008 financial crisis will
be seen as a minor blip if we default,” he said.

The president
said, “The Republicans are forcing the risk of a default on us. I can’t
stop them from doing that. We can have the fight now, or we can have the
fight later on, but the fight is coming to us.”

So, no, Obama said, he was not going to cave. Period. He said good night, got up and left.

... Obama never had to confront the veto question. A few days later, House
Republicans dropped their insistence on the two-step plan. The final
plan accepted a debt limit increase that would take the country through
the 2012 presidential contest. It also postponed $2.4 trillion in
spending cuts until early 2013.

Currently Reading

In Defense of a Liberal Education, by Fareed Zakaria. New York: W.W. Norton & Company, the damn Kindle edition doesn't include the publication date.

"The New York Times columnist Nicholas Kristof has pointed to three ideas associated with the humanities that have positively shaped the world. First, he notes the philosopher Isaiah Berlin's warning that the belief in a single, all-encompassing truth inevitably produces blind arrogance, possibly leading to dangerous consequences. Second, he highlights John Rawls's contribution to political thought: that the most just society would be the one you would choose if you did not know how rich or poor or how talented or untalented you were when born into it. ... Lastly, Kristof highlights the work of Peter Singer, who has brought the treatment of animals and the pain that human beings often needlessly cause them to the fore of our moral consciousness."